Outlook for Oil Prices ‘Only Getting Murkier,’ Energy Agency Says
By Stanley Reed, April 15, 2015
LONDON — The outlook for oil prices is still uncertain after the sharp fall that began last summer, the International Energy Agency said on Wednesday.
Given the price collapse, “one might be hoping for more clarity on supply and demand,” the agency acknowledged in its monthly Oil Market Report, which was released on Wednesday. “Yet in some ways, the outlook is only getting murkier.”
Oil prices, which have fallen about 50 percent since June, rose after the report and a separate United States government report that said that American crude stockpiles had risen less than expected.
The international benchmark, Brent crude, was up about 3 percent on Wednesday, to $60.35, while its American counterpart jumped more than 5 percent to about $55.97.
The agency’s report reflects a broad debate inside and outside the oil industry about where prices might eventually settle.
Citigroup, for one, expects prices to continue falling in the coming months, as output remains high, supply is building up and investors who had helped prop up prices begin to sell.
“While prices have held relatively firm, there are significant signs of weakness ahead,” Citigroup said in a note to clients on Tuesday.
Royal Dutch Shell, the oil giant that announced an almost $70 billion takeover of the British oil and gas producer BG Group last week, is expecting prices to recover much of their recent drop over the next few years. It projects prices to hit $90 a barrel in 2018.
As the International Energy Agency noted, competing forces are still playing out in the market, making the direction difficult to discern. Low prices have stimulated higher-than-expected demand for oil products in China, India and even Europe, which has been plagued by lethargic economic growth, the agency said. But whether that increased consumption is a “temporary aberration” remains to be seen, it added.
There is much uncertainty, for instance, over future crude demand from China, which on Wednesday reported economic growth of 7 percent, the weakest rate since early 2009.
Supply is also hard to gauge. While there are signs that low prices are beginning to have an impact on the production of oil from shale rock, overall oil output in the United States is expected to grow this year, the agency said.
In addition, the Organization of the Petroleum Exporting Countries is showing no signs of backing away from the policy, backed by Saudi Arabia, of holding onto market share regardless of falling prices. OPEC production rose almost 900,000 barrels a day in March from a month earlier, the agency said, as Saudi Arabia increased production to more than 10 million barrels per day.
Among the uncertainties in the market is the potential effect on oil supplies of a proposed nuclear accord with Iran, a major producer, the agency said. International sanctions have sharply reduced the country’s sales of oil, and an accord is expected to ease, or lift, those sanctions.
While it would take time for Iran to organize the enormous investment that would be required to sustainably bolster its production capacity, the agency said that the country might be able to make short-term changes to increase output and exports relatively quickly.
For instance, the agency said, Iran has 30 million barrels of oil stored on tankers, which could quickly feed an increase in exports. The agency also estimated that Iranian oil fields could ramp up production to as much as 3.6 million barrels a day, a 29 percent increase, within months of sanctions being lifted.
Specialists have been working at some of those sites, and “some of Iran’s core fields,” which were run down, may already have been revived, the agency said.
Under the pressure of sanctions, both Iranian production and exports have been curbed. Exports are down about 50 percent since 2012, to an average of around 1.1. million barrels a day, though they rose to 1.3 million barrels a day in March on high demand from China.
Bakken-bearing pipeline meets stiff opposition in the Land of 10,000 Lakes
Daniel Cusick, EnergyWire, April 10, 2015
MINNEAPOLIS — A Canadian company proposes a multibillion-dollar oil pipeline through some of the Midwest’s prized lakes and wetlands, igniting a firestorm among environmentalists, tribes and anti-fossil fuel activists who say the proposal is built on hollow promises of economic development and dubious claims of environmental protection.
Sound familiar? It should. But the pipeline isn’t Keystone XL, and its developer is not TransCanada Corp., purveyor of the most polarizing energy project since the Yucca Mountain Nuclear Waste Repository.
It is called Sandpiper, and its developer is Enbridge Corp., another Calgary, Alberta-based conglomerate whose extensive oil and gas pipeline network plunges deep into the U.S. interior.
The $2.6 billion Sandpiper project, which would move 225,000 barrels of crude per day roughly 610 miles from the Bakken oil fields of North Dakota to an Enbridge hub in Superior, Wis., has been approved by North Dakota regulators. But it remains under administrative review in Minnesota, where developers are seeking a certificate of need to ship the oil and a route permit to build the pipeline across 300 miles of the state’s Lakes Belt.
An administrative law judge in St. Paul next week is expected to issue an advisory opinion that the Minnesota Public Utilities Commission will use to resolve some thorny questions around Sandpiper, including whether the line is necessary and what route it should follow to move Bakken crude across Minnesota to Wisconsin, where it would flow to other Enbridge lines serving refineries in Michigan, Illinois and Ohio.
Marathon’s president and CEO, Gary Heminger, has said the Sandpiper investment will give Marathon a 27 percent stake in Enbridge’s North Dakota pipeline system once the line is completed and provide “additional access to growing crude oil production from the Bakken Shale play and Canada, and direct participation in the transportation of these crudes into our markets.”
The opening of a new corridor through Minnesota will also help Enbridge manage aging infrastructure along its existing pipeline route through the Upper Great Lakes, known as the Lakehead System. Currently, six existing pipelines, some built as early as the 1950s, follow the Lakehead System route from a key Enbridge oil terminal in Clearbrook, in northwest Minnesota, to the cities of Bemidji and Grand Rapids before dipping south to Duluth and Superior.
Clearbrook is also the primary U.S. hub on Enbridge’s system for delivering Canadian tar sands oil from Alberta into the United States, and Enbridge has invested heavily in recent years to upgrade those lines, including adding new pump stations in Minnesota that will push up to 800,000 barrels per day of heavy Canadian crude to U.S. refineries.
Moreover, if Sandpiper is approved, Enbridge has said it will pursue another set of state permits to relocate one of its key Lakehead pipelines, known as Line 3, that was built in 1968 and is in need of retirement. Rather than rebuild Line 3 in its existing corridor, Enbridge has said it would prefer to relocate the line along the Sandpiper route at a cost of roughly $2.3 billion.
But environmental opposition, combined with lengthy regulatory proceedings, sagging oil prices and a troubling history of spills, including an 840,000-gallon contamination of Michigan’s Kalamazoo River in 2010, have created considerable hurdles for Enbridge as it tries to push through one of its most ambitious U.S. pipeline expansions in recent memory.
The stakes — for Enbridge, for its U.S. customers, and for residents and tribes in North Dakota and Minnesota — are high. If the Sandpiper line is built, the company says, millions of barrels of Bakken crude will be moved more safely and cheaply across northern Minnesota, while at the same time alleviating rail corridor congestion and reducing the risk of rail accidents like the Dec. 30, 2013, fiery collision between a derailed grain train and 108-car oil train near Casselton, N.D., resulting in 400,000 gallons of spilled crude and the evacuation of 1,400 residents.
Dealing with the ‘Keystone effect’
Currently, more than two-thirds of the North Dakota’s oil exports are shipped by rail using tanker cars, according to federal estimates, many of which lack the kind of safety features that have been proposed by the U.S. Department of Transportation and could become law later this year. More recent rail accidents, including oil train derailments in West Virginia and Illinois, have further pressured the oil and gas industry, railroads and government officials to find alternatives to shipping oil across long distances by rail and truck.
But if shipping crude by rail has come under tough scrutiny from the public and regulators, pipelines have fared little better, as evidenced by the industry’s track record of spills — estimated at 1,400 “significant incidents” since 1986 — and the deep political fissure over Keystone XL, which after years of languishing under a State Department review succumbed to a presidential veto in February after Republicans in Congress sought to approve the line legislatively.
The “Keystone effect,” as some have called it, goes beyond concerns about pipeline safety and routing to incorporate a broad suite of environmental issues, among them fossil fuel dependency and oil consumption’s contribution to greenhouse gases that drive climate change.
Al Monaco, Enbridge’s president and CEO, addressed some of those challenges in a speech to business executives in Minneapolis late last month.
“Solving infrastructure problems at its base is not rocket science,” he told the Minnesota-Canada Business Council, stressing the advanced technologies and materials deployed by industry to site new oil pipelines, inspect existing lines, and detect problems early and respond quickly.
The bigger challenge, Monaco said, stems from organized opposition to traditional energy resources and even some renewable resources such as wind turbines, and “the elevation of regional energy projects to a national policy debate.”
“This isn’t just short-term noise,” Monaco said. “Today, our regulators, our political leaders, our employees and the public, they expect more of energy companies. They want to know what we’re doing to continually improve, to get better.”
Working around the ‘Lakes Belt’
For critics like Kathryn Hoffman, an attorney with the Minnesota Center for Environmental Advocacy, “getting better” means several things, including acknowledging mistakes and correcting operational problems that cast doubt on Enbridge’s safety track record, including the record 2010 spill in Michigan, where cleanup remains a work in progress after $1 billion spent.
Hoffman and her client, the nonprofit group Friends of the Headwaters, also want Enbridge to explore alternatives to its preferred Sandpiper route, which crosses northern Minnesota’s “Lakes Belt,” a region dense in lakes, streams, wetlands and forest. To date, the company has refused to look at alternatives, saying its chosen Sandpiper route offers the best conditions, both environmentally and economically, for the line to make its way from an existing oil terminal in Clearbrook to its terminus at Duluth-Superior.
Hoffman, who has petitioned the Minnesota Court of Appeals to force a more detailed environmental review of Sandpiper than what is required by the PUC, said her client is not seeking to simply block the Sandpiper line from being constructed. Rather, she wants Enbridge to more fully examine the preferred route’s impacts to natural areas and weigh those findings against alternative routes that run along more developed corridors.
“Our position is that the proposed route is probably one of the worst locations in the state of Minnesota to run a pipeline,” she said.
Similar concerns were raised by Minnesota’s two environmental agencies — the Department of Natural Resources and the Minnesota Pollution Control Agency — prompting the PUC last September to take an unprecedented step of asking for more information on alternative routes.
The Minnesota Department of Commerce provided a detailed report on six alternatives last December, but Enbridge maintains that none is viable because all are longer, are more expensive to build and do not pass through its terminal at Clearbrook, a critical element of the project.
“The fundamentals behind the project call for leveraging the existing infrastructure that’s already in place,” Paul Eberth, Enbridge’s Wisconsin-based Sandpiper project manager, said in a telephone interview. “By going to Clearbrook and then to Superior, we can make connections to customers without having to build a new line all the way down to the southern part of the state,” as most of the alternatives propose.
‘Oil companies are asking too much of our state’
But opponents of Sandpiper in its current configuration say southern Minnesota, where farming and urbanization have already altered much of the natural landscape, is exactly where new oil pipelines belong.
Among those pushing for a re-route are members of the state’s 40,000-person Ojibwe tribe, also known as the Chippewa or Anishinaabe, whose leaders maintain that the Sandpiper project threatens to foul northern Minnesota’s pristine waters with oil and disrupt traditional activities such as wild rice harvesting that are central to Native American life in the Great Lakes region.
Frank Bibeau, an attorney and member of the White Earth Nation of Ojibwe, whose reservation extends across three northern Minnesota counties, said in an interview that Enbridge has failed to examine such impacts in its Sandpiper routing decision. Moreover, the company continues to maintain that the pipeline does not physically cross tribal lands and therefore does not violate the tribe’s rights.
“We beg to differ with them on that point, and strongly,” said Bibeau, who maintains that the tribe’s treaty rights extend beyond reservation boundaries when dealing with traditional activities like wild rice harvesting.
Honor the Earth, a national activist group led by White Earth member Winona LaDuke, the former Green Party vice presidential candidate, has also pressed state officials, including Gov. Mark Dayton (D), to force a reconsideration of Sandpiper’s current route and issue a moratorium on any new pipeline development in the state’s lakes region.
“Oil companies are asking too much of our state,” LaDuke wrote in a letter to the governor. “While we remain a fossil fuel economy at present, sending one new pipeline … across the beautiful North Country is wrong and is not a good move for Minnesota.”
The group has taken its message public, too, with colorful roadside billboards and horseback rallies in hamlets like Backus, Minn., where the pipeline is proposed to cross an arterial highway just south of the Corner Store Restaurant & Gun Shop, a local gathering spot.
On a recent afternoon, Dave Sheley, the Corner Store’s owner and proprietor for 18 years, said the Sandpiper project has been a regular topic of conversation, both pro and con, among patrons of his cafe.
He described Backus and surrounding Pine County as “a poor community in general with a rich sub-community of cabin owners,” many of whom trek north on weekends from the Twin Cities to fish, swim, boat, bicycle or hunt in the region that otherwise has little happening economically.
While some are encouraged by Enbridge’s promise of 1,500 construction jobs and an estimated $25 million in new annual tax revenue, others say such benefits are countered by the intrusion of a major oil pipeline and the long-term risk of an accident or spill.
Sheley said he has seen a smattering of new business from surveyors and consultants working along the corridor route, which parallels an electricity transmission line. But he also knows that any surge in business during the line’s construction would be temporary, and the greatest economic benefit will go to landowners who have cut deals with Enbridge to route the pipeline across their property.
“I don’t own any land where they want to build, so I don’t have skin in the game,” he said. “For the most part, I’d say those people tend to be the most positive about it. But I can also see why the cabin owners and naturalist groups are concerned. A spill would be a big bummer if it happened.”
Big Oil’s Plan Will Destroy Songbird Habitat, Fuel Global Warming and Threaten Our Drinking Water.
The Keystone XL tar sands pipeline was only the beginning. Big Oil has a much bigger plan to triple the production of climate-wrecking tar sands oil in Canada and send as much as 6 million barrels a day gushing into America. But this Tar Sands Invasion can be stopped — if we act now. Urge President Obama to repel Big Oil’s full-blown tar sands assault and protect our natural heritage, our communities and our climate from the dangers of filthy tar sands oil.
Make Your Voice Heard! – Sign the NRDC Petition
Your petition will be sent to: President Barack Obama
Subject line: Protect us from dirty tar sands oil
Dear President Obama
Thank you for vetoing the bill that would have forced approval of the Keystone XL tar sands pipeline. Now, your State Department is about to issue its final decision that will determine whether this climate-wrecking pipeline is in America’s national interest.
There is clear and compelling evidence that the Keystone XL will drive significantly more global warming pollution and more climate chaos. In short, it fails your climate test and should be rejected. In addition, piping the dirtiest oil on the planet through the heart of America would endanger our farms, our communities and our water supplies — all while worsening our dependence on fossil fuels and providing very few permanent jobs. That is absolutely not in our national interest.
Thank you for keeping your promise to veto any legislation that would have green lighted the Keystone XL. I urge you to stand strong against pressure from the oil industry and their allies in Congress by rejecting the Keystone XL tar sands pipeline once and for all.
Repost from The Contra Costa Times [Editor: Significant quote: “WesPac officials said they dropped inbound crude oil shipments by rail from their plans for several reasons, including public sentiment against it, an unstable regulatory environment surrounding those shipments, and drops in crude oil prices that have made such shipments less economically viable.” – RS]
Pittsburg: Critics blast proposed oil terminal, even without Bakken crude trains
By Sam Richards, 04/07/2015 12:31:04 PM PDT
PITTSBURG — Train loads of Bakken crude oil are no longer in the plans for a proposed oil storage terminal near the waterfront, but that does not mean the project is being welcomed to town with open arms.
The City Council voted 5-0 Monday night to approve amending the environmental report for WesPac Midstream LLC’s proposed Pittsburg Terminal Project, which would renovate and modernize a long-dormant PG&E tank farm between West 10th Street and the Sacramento River waterfront.
The key change is that the five previously planned 104-car trains of domestic oil, mostly the volatile Bakken crude, are no longer part of the project. The new EIR will reflect that.
Councilman Sal Evola stressed that the vote reflected the council’s desire for “the process” to play out and fully vet the proposal.
“Every project at least deserves its fair process,” Evola said. “I’m all for preserving our industrial base, but we have to do it safely, and fair process is needed.”
Others were less interested in process, saying the WesPac proposal to bring an average of 242,000 barrels of crude or partially refined crude oil to be unloaded daily from ships and from pipelines, and stored in 16 tanks on 125 acres, is a problem for various reasons.
Speakers told the council that vapors from the storage tanks, the possibility of spills into the Sacramento Delta and the danger of the tanks exploding — all near hundreds of downtown homes — are potential issues, and that the project should simply be rejected.
“The only way you can mitigate this project is not do it,” said Willie Mims, representing the NAACP and the Black Political Association.
And though some at the meeting Monday night are grateful that WesPac that no longer plans to bring crude oil to the terminal by rail, others told the council that leaving out rail shipments doesn’t come close to salvaging the project. Some 30 people holding up “No WesPac” signs or wearing similar T-shirts crowded the council meeting.
Without the trains, the Pittsburg Terminal Project would now take oil from ships and a pipeline from the Central Valley and store it for later processing by refineries in Martinez, Benicia, Rodeo and Richmond.
Pamela Aranz of Antioch, representing the group Global Community Monitor, was one of several speakers who criticized the WesPac proposal as a dinosaur — old-fashioned, with increasingly outmoded technology. Others said the oil terminal would be at cross purposes with a nicely developing downtown area. Developing wind and/or solar power on that land, Aranz and others said, would make better sense.
Plans for the Pittsburg Terminal Project, first proposed in 2011, had been dormant for the past year, after local groups like Pittsburg Defense Council had protested the prospect of trains carrying volatile Bakken crude oil rolling in to the city. Communities across the United States — including Pittsburg, Richmond and Berkeley — have come out in opposed to crude by rail shipments through their cities after several high-profile derailments, including one in Lac Mégantic, Quebec, in 2013 killed 47 people and destroyed part of that city.
The new environmental report, to be paid for by WesPac, will replace an earlier one that was criticized in 2014 by the state Attorney General’s office because it did not suitably analyze air pollution impacts, address the risks of accidents involving storing and moving oil, consider the project’s climate change impacts, and consider a “reasonable range of alternatives” that could reduce impacts. WesPac officials said they dropped inbound crude oil shipments by rail from their plans for several reasons, including public sentiment against it, an unstable regulatory environment surrounding those shipments, and drops in crude oil prices that have made such shipments less economically viable.
If the needed approvals come at a typical pace, renovation work at the old PG&E tanks could begin in early 2016, and likely would take between 18 and 24 months.
Representatives from several area labor union locals supported moving ahead with the environmental study. Some said Monday night they wanted the jobs, both to rebuild the terminal and to operate it. Others said they favored the environmental process determining whether the terminal would be a safe place for union workers to be.
That, Evola said, is one benefit of continuing the process. “We want to be overly transparent,” he said.
That is fine with Lisa Graham and other members of Pittsburg Defense Council.
“We’ll be shining a bright spotlight on the project in the coming months,” she said.